Of boom, bust and a budding recovery

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Private equity (PE) entered a golden era from 2004 to 2007. With a growing economy, inflation in check, policy stability and businesses hungry for risk capital, PE entered a golden period at the turn of the century as fund managers invested between $500 million and $2 billion every year. They delivered in excess of 40 per cent gross returns from deals exited in 2004-06. Emboldened, a period of exuberance followed as investors raised record levels of capital and put over $42 billion to work in three short years. Returns fell precipitously and holding periods increased. A period of rationalisation followed as several first-time funds became inactive, with a proportionately larger number of experienced funds dominating the market. From 2012-15, the segment appears to be entering a period of resurgence, with more stable funding, investments and a more disciplined focus on exits. McKinsey provides an overview of Indian PE.